Chapter 01 Test Bank KEY
1. The principles of economics cannot explain which of the following:
2. Decisions about how to allocate resources are made by:
3. Which of the following statements best describes the study of economics?
4. Alan could most directly apply the principles of economic decision making with respect to his job when:
5. Which of the following is not considered an economic resource?
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6. The two broad fields that make up the subject of economics are:
7. Which of the following is considered a microeconomic issue?
8. Which of the following is considered a microeconomic issue?
9. Disney World decides to charge local residents a lower price than other park visitors. This would fall
under which field of economics?
10. Which of the following is considered a microeconomic issue?
11. Which of the following is considered a microeconomic topic?
12. Which of the following could be an example of a question that would be studied in microeconomics?
13. Which broad field of economics would most likely study how consumers respond to a hike in cigarette
taxes?
14. The broad field of _____________ would most likely study how all consumers respond to a hike in
cigarette taxes.
15. The Bureau of Economic Analysis releases last quarter’s growth rate in real GDP. This release would
most likely have been written by what kind of an economist?
16. Which of the following is considered a macroeconomic topic?
17. Which of the following could be considered a macroeconomic issue?
18. Which of the following questions would a macroeconomist most likely try to answer?
19. Which of the following is a topic studied in macroeconomics?
20. Macroeconomics includes the study of:
21. Mitt Romney argued in a debate with President Obama that the economy had grown more slowly in
each year of the President’s term than in the year prior to Obama’s presidency. This claim is most related
22. Which of the following economic decisions would most likely be studied by a macroeconomist?
23. The assumption of rational behavior:
24. A rational choice is one that:
25. When we believe the best result will come from the decision we have made, we are being:
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26. When we assume that consumers want to pay the lowest price possible, we assume that consumers
are:
27. Which is not one of the four basic questions used by economists to break down problems?
28. Which of the following is one of the basic questions used by economists to break down problems?
29. Which of the following is a question that an economist would use to break down a problem?
30. Scarcity can best be defined as a situation in which:
31. Scarcity reflects our inability to satisfy wants due to:
32. The economic concept of scarcity refers to the fact that:
33. Which of the following is a not direct result of scarcity?
34. Which of the following describes a problem created by scarcity?
35. Individuals, firms, and societies are limited in the amount of goods and services that they can
produce. This is a direct result of:
36. The problem created by “scarcity”:
37. Scarcity is:
38. Scarcity requires that we:
39. The problem of having unlimited wants under the constraint of limited resources can describe the
problem of:
40. The greatest constraint faced by banks considering the alternative of lending to Bangladeshi villagers
is:
41. The only rental house available at your favorite lake on July 4th is out of your price range. This is an
example of:
42. “There is no such thing as a free lunch.” This is an example of which economic concept?
43. Purchasing a smart phone data plan, premium movie channels, and University of Alabama football
season tickets results in you having to drop your health insurance plan. This can be described as:
44. Trade-offs are:
45. When making a decision, it is easier to identify and evaluate which of the following?
46. People choose to do something:
47. Your school offers college seniors one “free” college course. Is this course also free to society?
48. Opportunity Cost:
49. You decide to drive your car on a long road trip of 1,500 miles. The opportunity cost of driving your
car:
50. If Johnny weren’t in economics class this morning, he’d be sleeping. The value Johnny places on
sleeping represents his:
51. Your sister always brags about how savvy of a grocery shopper she is. She believes that she saves
lots of money by paying with coupons and making her grocery purchases at multiple stores to get the
lowest prices on all goods. She may overestimate her savings because:
52. In the early 1990s, before pay at the pump was an option, a gas station decides to force people to
pre-pay due to drive-offs. The opportunity cost of this decision may include:
53. The Federal Drug Administration slows the pace at which helpful medications reach the marketplace.
The alternative of having the medication available to consumers earlier is an example of:
54. Saturday afternoon you can either attend a street festival, work and earn $100, or study for your
midterm exam. You flip a coin between the street festival and studying, but did not really consider
working. The coin flip determined that you would stay home and study. The opportunity cost of the time
spent studying includes:
55. Jimmy is very excited about the costume party with a 1990s theme. He is planning to dress up as MC
Hammer but is also considering going as a lifeguard from Baywatch. His opportunity cost of arriving
dressed like MC Hammer is:
56. A local fast-food restaurant mails out coupons for a free sandwich to every home in the community.
The opportunity cost of redeeming the sandwich for someone who was on a diet might be:
57. You are shopping at the local mall with an $80 gift certificate. Only three items catch your attention.
The items include a Justin Bieber sheet set, a remote control helicopter, and an “Amazing Ab Belt.” You
would be willing to give up $60 for the sheets, $70 for the belt, and $80 for the helicopter. Knowing this,
you decide to purchase the helicopter. The opportunity cost of the helicopter was:
58. Cameron can spend the afternoon playing golf, driving his boat, or cleaning his house. Although he
enjoys golf, he sometimes becomes frustrated when playing. He decides to enjoy a more relaxing
afternoon on his boat. Cameron never thought about cleaning the house but did give golf some serious
consideration. Cameron’s opportunity cost of taking his boat out was:
59. Making a decision “on the margin” involves comparing:
60. After purchasing a coffee cup from your local gas station for $5.00, you can always refill your cup for
$0.50. The marginal cost of your 10th cup of coffee purchased at the gas station is:
61. After purchasing a coffee cup from your local gas station for $5.00, you can always refill your cup for
$0.50. The sunk cost of the coffee purchased at the gas station is:
62. A local street festival that previously sold bracelets in exchange for unlimited alcohol consumption is
now concerned about the overconsumption of alcohol. If they switch to selling tickets per drink, will overall
consumption at next year’s festival decrease?
63. A college student decides to spend the afternoon watching three movies rented from Red Box. The
cost of each movie is $1. The student was willing to pay $4 to rent each of the first two movies and $2 to
rent the third movie. What was the marginal benefit received by the student when renting the 2nd movie?
64. A college student decides to spend the afternoon watching three movies rented from Red Box. The
cost of each movie is $1. The student was willing to pay $4 to rent each of the first two movies and $2 to
rent the third movie. What was the marginal benefit received by the student when renting the 1st movie?
65. A college student decides to spend the afternoon watching three movies rented from Red Box. The
cost of each movie is $1. The student was willing to pay $4 to rent each of the first two movies and $2 to
rent the third movie. What was the marginal benefit received by the student when renting the 3rd movie?
66. The extra cost associated with producing or consuming the next unit is called the:
67. Many theaters sell empty seats at a deep discount just before show time. What economic concept is
displayed by this behavior?
68. The extra benefit associated with producing or consuming the next unit is called the:
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69. The deadline for your research paper is tomorrow and you still need a day of work to complete the
paper. Unfortunately, you are scheduled to work all day in the cafeteria. You can turn the paper in one
day late for a 10 percent penalty or take the day off of work and turn the paper in by the deadline. Losing
a day of wages will cost you $90. The marginal cost of turning the paper in on time is:
70. A movie costs you and your friend $15 each. After one hour of watching the movie, you have
struggled to stay awake while your friend has been on Facebook and is also bored with the movie. You
suggest that you and your friend leave the movie and go to the park. Your friend responds by stating that
he is not going to waste his $15 that was previously spent on the movie. Your friend is considering:
71. You have paid all expenses to travel to your favorite beach for a vacation. You made these payments
early in order to receive a discount and all payments are nonrefundable. Unfortunately, a hurricane is
likely to crash into the coast during your vacation dates. What should not be considered as you make a
decision to take your trip or not?
72. You decided to take a college accounting course to brush up on your knowledge of the language of
business. The tuition expense was $500. After the date has expired to receive a refund for the course,
you are offered a job that would conflict with your class time. In making the decision to accept or decline
the offer, the $500 is:
73. An incentive is a concept that addresses which question used by economists?
74. The price of pizza falls relative to the price of spaghetti, so people buy more pizza instead of
spaghetti. This is an example of responding to:
75. To provide an incentive for villagers to repay loans, in the text Muhammad Yunus:
76. Entrepreneurs tend to take greater risks if low tax rates offer greater after-tax profit potentials. The
government’s decision to offer low tax rates to entrepreneurs is:
77. Hardee’s announces “buy one get one free” breakfast sandwiches. This is an example of: